Excess Spectrum Charge for Incumbeants in Delhi High Court

The Cabinet has recently decided that all GSM operators that hold spectrum above 4.4 MHz in any circle will have to pay a one-time fee. Notably, Airtel and Idea have excess spectrum of 73MHz and ~35MHz, for which they will have to make a payment of US$825m and US$325m, respectively. DOT had asked the operators to pay the excess spectrum charges by mid-January 2013. Incumbent operators (including Bharti and Idea) filed a petition in the Bombay High Court, seeking a stay order on this demand for payment. The court has now extended the relief to Idea till 04 April 2013.

The Delhi High Court has extended the stay order on DOT’s decision that demanded that telecom operators (including Idea and Bharti) pay the one-time excess spectrum charges by mid-January. The stay order was based on a petition filed by incumbent operators challenging the DoT order to pay the one-time fee. Earlier, the court had put a stay order till 01 March 2013. However, now DOT has sought more time to respond to the court. Hence, the next hearing is now scheduled for 01 April 2013 and the court has extended the stay order on payments till 04 April 2013.

We believe that the Indian telecom industry is going for virtual consolidation (number of meaningful players down to 6 from early teens) given the weak profitability and upcoming regulatory cost burden. We expect incumbents – notably, Idea and Airtel – to benefit from emerging trends (consolidation, growth in data, potential tariff hikes, etc) in the medium to long term.

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